The Cabinet Office has issued a new Procurement Policy Note in response to the Covid-19 outbreak and in order to maintain service continuity to the public sector (PPN 04/20).
PPN 04/20 builds on what the Cabinet Office has previously set out in PPN 02/20 (Supplier relief due to Covid-19) and informs contracting authorities on the steps to take in developing transition plans to exit from any relief granted under PPN 02/20 as soon as possible.
PPN 04/20 is effective from 1st July 2020 to 31st October 2020. NB: It is not in force yet but should be considered by contracting authorities now so that they can put their plans in place in a timely manner.
The PPN requires contracting authorities to actively consider whether any of their suppliers are now at risk as a result of Covid-19 and accordingly whether any of the supplier relief provisions set out in PPN 02/20 should apply to their public contracts, where such relief has not been applied previously.
Conversely, if a contracting authority has already given relief under PPN 02/20, it should now be working with its affected suppliers to put in place appropriate exit provisions from the relevant relief, and agree individual transition plans to enable a "new, sustainable, operating model" to allow service delivery to resume. The overall themes of this PPN are ones of collaboration, openness and transparency.
Who does PPN 04/20 apply to?
PPN 04/20 sets out its scope in paragraph 3, and states that PPN 04/20 applies to "all contracting authorities, including central government departments, executive agencies, non-departmental public bodies, local authorities, NHS bodies and the wider public sector (excluding Devolved Administrations)".
Given that PPN 04/20 updates and builds on the provisions of PPN 02/20, and on the basis that scope of PPN 04/20 remains as drafted in PPN 02/20, it seems to us that Registered Providers of Social Housing continue to have discretion as to whether they will or will not apply the provisions of both PPN 02/20 and PPN 04/20.
Continued supplier relief
PPN 04/20 makes clear that the supplier relief provisions under PPN 02/20 are still available to contracting authorities who should continue to actively review their portfolio of public contracts (including those contracts where they are already providing contractual relief due to Covid-19).
With that in mind, PPN 04/20 requires contracting authorities to continue to review their contract portfolio and consider whether it is still appropriate to provide relief in line with PPN 02/20. Additionally, contracting authorities should also consider whether relief is appropriate for suppliers of critical services, even where they may not have previously requested relief but might require it going forward. Where relief is appropriate in order to maintain delivery of critical services, contracting authorities should continue or commence measures in line with PPN 02/20 (including, for example, advanced payments and relief against current contractual requirements).
Recovery and transition
PPN 04/20 emphasises the need for contracting authorities to move into the next phase of the response to the Covid-19 outbreak. This means that they now need to consider their exit from any relief currently given (or soon to be given) in line with PPN 02/20, as well as how they will transition to new and sustainable operating models to ensure continued service delivery. As part of the transition planning required under PPN 04/20, contracting authorities should now work with affected suppliers to develop transition plans ready to be implemented as soon as possible and, in any event, before the end of October 2020.
PPN 04/20 highlights the importance of working in partnership with suppliers and encourages open and pragmatic dealings to ensure that contracts remain sustainable following the exit and transition from supplier relief. Working in partnership, the contracting authority and its suppliers should agree a transition plan which sets out:
- The planned exit day when supplier relief will end (to be reviewed to reflect changes to the current situation, such as the introduction of local restrictions);
- If advance payments have been made, if/when outstanding goods or services will be delivered;
- The process for reconciling payments made against costs (as set out in the model interim payment terms accompanying PPN 02/20);
- An assessment of any costs associated with implementing Public Health England guidance specifically in relation to delivering the contract in question (to be considered on a case-by-case basis); and
- An assessment as to the operational relevance and viability of the contract in light of Covid-19 and, where necessary, proposals for amendment or termination of the contract.
Operational relevance and viability of contracts
There may now be instances where a contracting authority decides that a contract no longer remains relevant or viable. If that is the case, the contracting authority and the affected supplier now need to work together to identify alternative options.
One such option may be to vary the existing contract in line with Regulation 72 of the Public Contracts Regulations 2015 to adapt the commercial model in a way that allows the contract to remain viable (for example, by setting new, achievable, actions and timescales). PPN 04/20 explicitly sets out that unreasonable expectations around transfer of risk and cost are likely to increase the probability of contract failures, and the parties should bear this in mind when seeking to ensure the ongoing viability of affected contracts.
Where a contract modification cannot be identified which would allow contracts to remain relevant and/or viable, contracting authorities may need to consider terminating the contract in question. Where termination is identified as a solution, the contracting authority and the supplier will need to work together to pursue termination of the contract in accordance with the termination provisions set out in the contract.
Engaging with suppliers
PPN 04/20 emphasises the importance of engaging with suppliers in a constructive and open manner. With this in mind, contracting authorities are directed to the updated Outsourcing Playbook for guidance on how contracting authorities and suppliers should work together.
Of particular note, Chapter 12 of the Outsourcing Playbook sets out guidance on building and maintaining successful relationships with suppliers. The Outsourcing Playbook highlights that all outsourcing projects should be run in accordance with the Supplier Code of Conduct which recognises the joint nature of public service delivery, and sets out guidance for how contracting authorities can achieve constructive and collaborative engagement with their suppliers (and implement the provisions in PPN04/20).
